The rapid expansion of blockchains has presented a central challenge for the cryptocurrency industry. With numerous projects emerging and existing layer-1 blockchains struggling to keep up, developers have been searching for solutions to ensure compatibility across different blockchain networks. San Francisco-based Connext Labs, however, claims to have found a long-term answer. This assertion is backed by investors, as Connext recently announced a successful $7.5 million strategic funding round, valuing the company at $250 million. Prominent backers include Polychain Capital, NGC Ventures, and Polygon Ventures, among others. This recent funding comes after Connext raised $12 million in a series A round in 2021.
In an exclusive interview with Fortune, Arjun Bhuptani, the founder of Connext, likened the project to the “HTTP of Web3,” drawing a parallel to the groundbreaking protocol that facilitated the interconnection of websites on the World Wide Web. Bhuptani emphasized the prevailing narrative in the industry, stating that blockchain infrastructure has the potential to build remarkable public goods, but scalability remains a significant obstacle. However, the solution lies in horizontally scaling the blockchains themselves by running multiple chains in parallel, similar to how the internet scales.
Connext acts as a facilitator for interactions across various blockchains. Bhuptani outlined several use cases for the project, including decentralized exchanges seeking to access users across different blockchains such as Bitcoin, Ethereum, and Solana. He also highlighted the trend of blockchain specialization, citing examples like Filecoin, which focuses on storage, and Sei, which specializes in trading. While other projects aim to interweave blockchains, such as Polkadot and Circle’s cross-chain transfer protocol, Bhuptani emphasized that Connext takes a different approach. Instead of attempting to solve the compatibility issue on a per-blockchain basis, Connext leverages the existing infrastructure of each blockchain, providing a protocol rather than an ecosystem.
Despite acknowledging the challenging market conditions, Bhuptani expressed Connext’s plans to utilize the new funding to decentralize more aggressively. This includes funding the setup and operation of Connext’s foundation, which will support community-led initiatives. Additionally, Connext intends to launch a token later this year, aiming for chain-agnostic functionality right from the start. While most cryptocurrencies are built on a single blockchain and then “wrapped” for portability, Bhuptani envisions the Connext token as being compatible with multiple blockchains. The project is currently working on a standard for cross-chain tokens that can function seamlessly across different ecosystems.
Regulatory challenges in the United States pose a significant hurdle for Connext and other crypto projects operating across multiple blockchains outside of Bitcoin and Ethereum. Recent actions by the Securities and Exchange Commission (SEC), which classified many altcoins as securities in lawsuits against major exchanges Coinbase and Binance, resulted in a decline in the value of cryptocurrencies like Solana and Polygon. Bhuptani acknowledged the flight of investors towards more established chains but noted that the transition away from Ethereum-specific scalability solutions like Arbitrum and Optimism has been relatively limited. He remains confident that the future necessitates the fragmentation of applications and users across different blockchain ecosystems, emphasizing the need to bridge them together.
Connext Labs stands as a promising player in the blockchain industry, offering a protocol that aims to overcome the compatibility challenges faced by various blockchains. With substantial funding, a visionary founder, and plans for decentralization, Connext is poised to contribute to the development of a more interconnected and scalable Web3 ecosystem.
